Verizon Lawsuit Muddies Spectrum Auction Plan

Verizon Wireless is challenging the government's rules for auctioning highly coveted frequencies in the 700 MHz band, raising fears about dampened enthusiasm for the radio waves in the face of legal uncertainty.

Verizon filed a lawsuit this week with the U.S. Court of Appeals for the District of Columbia circuit asking the court to review the FCC's "open access" rules.

To encourage new players to bid for the 700 MHz frequencies and inject new competition in wireless services, the Federal Communications Commission (FCC) decided in late July that consumers would be allowed to use any mobile devices and download any applications on one portion of the spectrum.

Proponents of open access, particularly Google and other high-tech companies, criticized Verizon's action, arguing that the rules were crafted to foster greater innovation and greater freedom for Internet users.

"Here the rules were set for the auction and they were heralded by a lot of people as being a pretty big step for consumers," said Google spokesman Adam Kovecevich. "For Verizon to sue, we don't think is in the best interest of consumers."

If the FCC goes ahead with its plan to auction the spectrum in January and a court challenge remains pending, auction winners could find themselves in the position of having to give back the frequencies if the rules are later overturned -- a not-unprecedented occurrence in auction history.

The 700 MHz spectrum is well-suited to carrying high-speed broadband applications, and the nation's largest wireless carriers have long had their eyes on it to boost their networks.

But when Google weighed in, promising to bid at least $4.6 billion if access to a portion of the frequencies were opened in four ways -- including wholesale and interconnection requirements in addition to the open access requirements -- the FCC saw an opportunity to promote competition in broadband services via a rival to cable and telephone companies.

The FCC ended up splitting the difference, ordering only two of the conditions sought by Google, which subsequently hinted that it remained likely to bid in the auction.

Several public interest groups, including the Consumer Federation of America, Consumers Union and Public Knowledge, decried Verizon's attempt to have the open access rules overturned, warning that it doesn't bode well for consumers and could delay the auction.

"It's one of these situations of Verizon being a bad winner. They got 99 percent of what they wanted from the commission," said Art Brodsky, spokesman for Public Knowledge.
"Verizon wins by litigation. It's one of their tools, and they're not afraid to use it."

Other major wireless carriers had voiced concerns about open access during the FCC's deliberations, but it is unclear whether Verizon will have allies in its court challenge. When asked for comment, AT&T spokesman Michael Balmoris pointed to a statement the company made July 18, lending its support to the balance struck by the FCC.

Verizon did not respond to a request for comment.

Google and public interest groups aren't the only ones speaking out against Verizon's action. Charging that the lawsuit "throws a wrench into the auction," Frontline Wireless said, "Verizon is challenging the FCC for doing what Congress required it to do in the first place  ensure that auction policy is guided solely by the public interest."

Verizon's court petition charges that the FCC's open access rules violate the U.S. Constitution, exceed the commission's authority, are arbitrary and capricious, and are contrary to other laws.

The petition does not go into any greater detail, but in a filing with the FCC July 24, Verizon spelled out its complaints, arguing, among other things, that:

the wireless market is sufficiently competitive to make regulatory meddling unnecessary;

open access rules would depart from the deregulatory approach the FCC and Congress have set out for the industry;

imposing the requirements on some wireless providers and would be arbitrary and capricious;

and open access would violate the First Amendment by placing "part of a platform for protected speech under government control."

The court challenge may not be the only wrench thrown into the 700 MHz spectrum plan. Interested parties have until Sept. 24 to petition the FCC to reconsider the auction rules, and those dissatisfied with the commission's attempt to strike a balance are gearing up to file.

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